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Special Report
Obamacare’s Skeptical Investors
Those cheering the fiscal responsibility of the national health care law often sound like corporate executives touting the latest earnings report.
With House Republicans poised to vote on repealing the national health care law later today, we’re going to hear a lot of numbers being thrown around, as supporters of ObamaCare tout the Congressional Budget Office estimate that the law will reduce the deficit and opponents arguing that it’s really a budget buster when you put aside the gimmicks.
Advocates of the national health care law say those of us who have been critical of Democrats’ fiscal claims are either lying, being misleading or simply cherry-picking CBO numbers that bolster our case while ignoring those that don’t. But the reality is that ObamaCare skeptics are merely applying a different mode of analysis to determine whether the law is fiscally responsible. And there’s nothing controversial about that — in fact, it’s something that’s done regularly in the financial community when it comes to evaluating companies.
When I worked as a financial journalist on the equities desk at Reuters, one of our biggest tasks was to weed through thousands of corporate earnings statements each quarter. When a company announced its earnings, most of the focus came down to whether it missed, met, or exceeded that quarter’s expected earnings per share (EPS) number. But as we came to learn time and again, that number wasn’t always the most accurate gauge of a company’s overall fiscal position, because the numbers were often reverse-engineered to meet targets. Some more skeptical investors would put less emphasis on the EPS number, and raise concerns about a company’s debt, cash flow, sources of revenue, or a myriad of other indicators.
There are many well-publicized examples of companies whose earnings statements obscured their true financial position, whether it was with Internet startups during the dot-com bubble, mortgage companies during the housing bubble, or other high-profile accounting cases such as Enron. Those investors who looked beyond the headline numbers and questioned the bullish analyses by many Wall Street analysts ended up being vindicated in many of these cases.
Those defending the fiscal responsibility of the national health care law often remind me of the corporate executives I would hear on conference calls touting their companies’ financial strength.
The problem is not with the analysts at the CBO, who merely evaluate what is put in front of them, but with those ObamaCare advocates who quote the CBO’s headline deficit reduction number, and act as if that’s the end of the story.
President Obama set out two main fiscal goals during the health care push — that the legislation would cost “around $900 billion” over 10 years and that it wouldn’t add to the deficit. And according to the CBO, Democrats were able to achieve that. But a deeper look at the numbers shows, for instance, that the only way Democrats were able to come close to that $900 billion figure was by delaying the major spending provisions (representing 98 percent of the legislation’s cost) until 2014, making it appear cheaper over the CBO’s 2010 through 2019 budget window. In reality, the true 10-year cost, once fully implemented, is well north of $1 trillion.
The various ways the legislation’s authors were able to achieve the deficit reduction number have been well documented. For instance, Democrats claimed $70 billion in premiums from a new long-term care insurance program called the CLASS Act as deficit reduction, even though that money is supposed to pay for the program’s future benefits. And the deficit reduction claims also assume that all of the Medicare cuts will be fully implemented as written, which the CBO cautions has not historically been the case, and that the so-called “Cadillac tax” on expensive health care plans will go into effect in 2018 over objections of labor unions.
Defenders of the law would argue that it’s disingenuous to make an argument based on the assumption that the law won’t be enacted as written. But even if one were to grant that, Democrats are still left with an unorthodox path to fiscal responsibility — one that drastically increases America’s entitlement obligations at a time when the nation is in the early stages of a long-term debt crisis caused by an inability to pay for the entitlements that we already have. The problem is that the combination of Medicare cuts and tax increases used to pay for ObamaCare are no longer available to offset the ballooning costs of these existing entitlements. Even more specifically, during the campaign, Obama proposed raising the payroll tax on higher incomes to help make Social Security solvent — instead, such a tax is being enacted to pay for the new health care law.
For the past two years, Democrats have been desperately trying to sell Americans on the idea that government can provide health insurance to all those who don’t have it and save money at the same time. But they’ve encountered a nation of skeptical investors.
About the Author
Philip Klein is The American Spectator’s Washington correspondent. You can follow him on Twitter at: http://twitter.com/Philipaklein
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Clint| 1.19.11 @ 6:44AM
"The latest Rasmussen Reports national telephone survey shows that 55% of Likely Voters favor repeal of the health care law, while 40% oppose repeal."
Bill Hussein O'Stalin| 1.19.11 @ 6:53AM
As you write this article a bill was introduced to change the medical loss ratio (MLR) that was set at 80%. States would not allow MLRs to rise up 65% because that would put the health insurers out of business because it's well known that health insurers won't be able to pay their administrative costs if they have to spend over that level.
Obamacare's requirement that 80% of premiums be spent or rebated was the one provision guaranteed to kill private health insurance companies. In that sense, it's a real job killer so the Republicans were correct in using that label. But they chickened out now and watered the name down.
If this part of the law isn't changed the debate is over. The health insurers will go out of business or have to subsidized by the government which means they are out of business anyway.
One way of breaking Obamacare is to change the MLR provisions. It's a long shot but it could happen.
Otherwise you can kiss your health care plan goodbye and 5 million people in the health care industry can kiss their jobs goodbye.
Ned| 1.19.11 @ 2:37PM
"Obamacare's requirement that 80% of premiums be spent or rebated was the one provision guaranteed to kill private health insurance companies."
You are exactly right, Bill - and that is exactly the intent of that provision, along with most of the rest of the bill - to kill private insurance companies, FORCING single-payer healthcare. All the Dimocrat talking points are just obfuscation to distract the country, while they destroy healthcare.
Ron| 1.19.11 @ 8:46PM
All the Democrats and most of the local welfare recipients refer to Obamacare as being "health care". I might be a bit teched but I was under the impression that this was insurance. When one has insurance, one is expected to cover the costs of Dr. office visits and other minor expenses out of pocket. The insurance is supposed to be for Tests, procedures and hospital visits. Have I been lied to about Obamacare? By our legislators? I can't believe it!
Nine most dangerous words, according to Ronald Reagan:
I'm from the government and I'm here to help!
Deborah D | 1.19.11 @ 7:27AM
Have you ever seen such lying, such manipulation, such underhandedness, such idiocy as this abomination of a "health care" bill. Republicans need to demonstrate over and over again how awful this legislation is. They need to highlight one awful thing about this bill each week. Take the huge pile of paper, give a chunk of it to each Republican representative and senator, and designate who will be talking about what ridiculous thing every week until election day 2012. In the meantime, withhold any funding for this monstrosity.
Bill -- the 80% mandate is just exactly as you stated, a way to drive private insurers out of business. If we allow this to go into practice, there will no longer be private insurance. The Dems will have successfully destroyed another private industry (along with our health care industry).
Bob K.| 1.19.11 @ 7:45AM
Meanwhile, according to "Politics Daily" yesterday, (see column by Christopher Weber) former Senate Minority Leader Bill Frist, M.D., R. Tennessee has joined forces with former Senate Majority leader Tom Daschle, D. North Dakota in advising the House not to repeal the bill because it contains good provisions that need to be "snuggled" and "cuddled." I kid you not! But then his family owns dozens of hospitals.
Bob K.| 1.19.11 @ 7:56AM
The Senator's project will concentrate on these 3 areas as they transition to the new rules: Insurance delivery, insurance reforms and delivery systems.
Deborah D | 1.19.11 @ 8:06AM
Good grief, Bob K., nothing good will come of this. Bill Frist, another RINO. "You may either win your peace or buy it: win it, by resistance to evil; buy it, by compromise with evil." John Ruskin. If you compromise with the devil, the devil wins.
Pecos Pete| 1.19.11 @ 9:21AM
A short story famous in the land of CPAs:
Owner needs to hire a new bookkeeper.
Owner creates a simple question involving the addition of a column of single digit numbers.
Applicants #1 and #2 add up the column of numbers correctly. Owner thanks them and says he will get back to them.
Applicant #3 looks at the column of numbers and says, "What do you want the answer to be?" Owner immediately hires applicant #3.
That's the CBO and the GAO today.
ironcowboy| 1.19.11 @ 9:48AM
Skeptical... the hell you say... (Most) Americans were never skeptical, the skeptical ones are the democrats who were trying to shove it in our face. Most Americans knew then and know now, it was an out right government usurpation of the rights of the people and the states.
Al Adab| 1.19.11 @ 10:39AM
They may very well sound like corporate cheerleaders and with reason. Anecdotaly we had cause to discover a hidden passage in the health care law this weekend. Our grandson,16, suffering from a serious ear infection got a prescription for some drops. Our pharmacy doesn't carry the specified name due to cost of over $200,00 for the milliliter bottle. We asked for the generic and the pharmacist replied, he could not under the new law change the prescription. The doctor had to represcribe the generic by name. Price of $4.00. Do we think there is a hidden payoff to the pharma cos? in the bill?
Ned| 1.19.11 @ 2:43PM
Don't think that is new - prescription forms I see these days have a check-box at the bottom... check if you will except a generic substitute... if the box ain't checked, the pharmacist can't give you a generic. If it is, he can.
Al Adab| 1.19.11 @ 3:17PM
According to the pharmacist, under the new law there is no choice. Was no box on the scrip. He cannot sell a generic without the doctor's prescription for it by name. No substitute for the "name brand" original.
JeffW| 1.19.11 @ 10:40AM
"Figures often beguile me," he wrote, "particularly when I have the arranging of them myself"
"There are 3 kinds of lies. Lies, Damned Lies, and Statistics."
Mark Twain
Nunya| 1.19.11 @ 11:07AM
Jeff,
My graduate statistics professer actually attributed that quote to Benjamin Disraeli on the first day of class, though he could have been mistaken.
The one thing that he did say that first day of class that I think is appropriate here is: "Always seek out who paid for the study--that will tell you as much about the answers you are seeing as the statistics themselves." There are always ways to manipulate the numbers, and dishonest politicians will do anything to make the numbers concur with their statements.
JeffW| 1.19.11 @ 2:30PM
Nunya,
Correct. That quote is also attributed to Benjamin Disraeli (at least that is who Mark Twain attributed it to). But apparently no one can find it in writing before he died. It is also attributed to Sir Charles Wentworth Dilke. No matter who says it, it is true. I just happen to be a Mark Twain fan, LOL.
Wayne | 1.19.11 @ 2:47PM
I almost majored in statistics. Then I realized that the average person was half male/half female. That statistics had NO basis in reality and it is purely a concoction, never observed.
Ken (Old Texican)| 1.19.11 @ 12:34PM
Mr. Klein,
"skeptical investors" it the wrong phrase, knothead.
Obamacare is a "protection racket". One does not precisely "invest" in protection gangsters. One bows to reality, and pays and pays and pays, or one shoots the gangsters in self defense.
In that case, the honest businessman will witness his family destroyed.
Horns of a dilemma, neh?
Wayne | 1.19.11 @ 2:45PM
You got it. That is the CHICAGO way.
kiltmaker| 1.19.11 @ 2:03PM
Common sense tells you that the provisions and costs in Obamacare are a farce.
Insuring more people, that probably have more serious problems, and reducing premiums and fees, flies in the face of logic and truth. Also, the administrative costs would probably skyrocket, its just the way government works.
Al Adab| 1.19.11 @ 2:38PM
If healthcare is a right, then government should run the hospitals and doctors should be government employees. If it is a commodity like others then people are allowed to buy it or not as they see fit with cash, insurance, savings plans or the like.
Chose your definition and follow it to the logical conclusion.
Wayne | 1.19.11 @ 2:44PM
We should keep saying that the Democrats have cooked the books. The numbers themselves are far less important than the way they came up with the numbers. It was meant to deceive us all, and points out to just how corrupt the Dems and Obama really are. That is the story.
wwajdblogger | 1.19.11 @ 8:03PM
American Jesus would not support the preventive health care provisions contained in Obamacare. Jesus cured the sick with his miracles after they were sick, not before. (Matthew 4:23-24) A true Christian can be healed of all medical maladies simply by praying fervently. Or maybe go to a pastor who can cure illness instead of a doctor. No Christian nation blessed by Jesus would support a socialized medicine system that would cure the sick and poor for free.
jstwndring| 1.19.11 @ 8:58PM
Who said it's free? In fact, it's going to raise the average family's insurance premiums by around $2,100/yr. I don't know where you're getting your "free" health care delusion from. Taxes are being raised signicantly as well. This free stuff sure is expensive.
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العاب بنات | 4.11.12 @ 2:25PM
skeptical investors" it the wrong phrase, knothead